Blog #1 : Toys "R" Us Strategy , This time definitely for "Us"

Blog #1 :  Toys "R" Us Strategy , This time definitely for "Us"

As a new mom, I am mostly overwhelmed with making “big” decisions for my daughter right from her birth to each milestone month that passes by. For anything I need I just place orders at Amazon or for in store purchase I go to Target or Walmart. Amidst my trips to Target, I saw an open store space which had a huge note written on it “ SORRY STORE CLOSED”, it was none other than Toys R Us.

After reading “ Your Strategy needs a strategy” I could not stop thinking about how a popular store like TOYS R US lost its presence and is diminished to its current state of bankruptcy. This 70-year-old store was once a one stop shop for all baby related purchases. It was renowned as the center for all toys in the toy industry, but it didn’t live up to this expectation for long. After years of slipping sales and increasing debt, the company filed for bankruptcy in 2017. 

The company belonged to the “Classical” model of strategy planning when they first started but over the years, they made no efforts in updating their strategy and plans with the changing trends of consumer behavior. Toys R Us failed to innovate their business models and a poor shopping/ customer experience in their stores was the key driver of their downfall. After they went private, their debt increased so much that there was no money left to innovate their processes or improve the existing store conditions.

The company started losing business to the sudden rise of retailers like Walmart and Target and it had a huge hit when they lost sales to online giant Amazon. The company did not invest in creating their online presence which would have been a great strategy for them to recover from the losses and increase their presence in the toy industry.

From the article “ Your Strategy needs a strategy” I definitely could see how by not updating one’s strategy with changing times it is nearly impossible to survive forget being profitable.

With a really hard hit, Toys R Us is coming back to existence following the “Adaptive” model of strategy planning. They are now partnering with Target to launch their websites thus working towards building their strong online presence and indirectly work with a well-established competitor to break the market. Learning from their past mistakes, they are working to build stores which will cater to highly engaging retail experience for customers. By proactively trying to fulfill its shortcomings Toys  R Us now sure does look like promising business venture.

Strategic Planning as a Game of Inches- Specifically the Six Inches Between Your Ears

A recent article by Ray Gagnon examines the strategic planning process from a sort-of meta-perspective.  You could almost think about it in terms of a strategy for strategy planning.  The main argument is that most organizations have a basic framework for strategic planning and are familiar with the nuts and bolts of that process, but the success of that strategic planning process can be tied more closely with the mindset of the strategic planners, and the organization as a whole.

What Gagnon proposes is that too much time is often spent worrying about things like the “models” that the planners will use or the venue that the group will use, but the fundamental mindset behind the strategic planning is often overlooked since it is less tangible than those other concerns. Simple awareness of the organization’s mindset and minimal investment in it at the beginning of the process can have a multiplier effect as planning progresses, and can help avoid situations where the planners get bogged down needlessly.

Gagnon and his team have developed a set of principles that they bring to any strategic planning exercise.  And again: the simple act of acknowledging these principles is a huge step in preparing the members of an organization responsible for strategic planning for the task at hand.

First, he advocates a “beginner’s mind”.  That is, experienced members of a strategic planning team bring bias with their experience.  Further, because those members were chosen to be a part of the strategic planning process, there is a tendency for members to be overconfident in their beliefs.  But experts are often experts in the past, not the present.  Before the strategic planning process even begins, members should try and exercise some humility so as not to dismiss new ideas, or ideas that might be unfamiliar.

Next, he warns about the dangers of navel-gazing, and encourages the strategic planners to adopt an “outward focus”.  The tendency in an organization is to focus on itself, since that is what it knows best.  But in terms of strategic planning, these members should devote at least as much time to competitors, the operating environment and to the organization’s customers.  At this early stage, it isn’t the time for debate, but rather it is important to set the framework in which the organization exists.  As a corollary to this principle, Gagnon also advises the organization to “face reality”, meaning the organization needs to accurately assess its situation, internally and externally, in order to set the right strategy.  It is far better to swallow the bitter medicine of reality in a strategic planning session, than to craft a strategy that only works in a world that doesn’t exist.

Next, Gagnon admits that the type of people typically asked to be a part of strategic planning are generally from highly competitive environments, each with their own strong opinions and agenda.  Get these biases out in the open, plan for them, and create a set of ground rules that work with and around them.  In this way, the organization can mitigate the effects of these inherent preferences from the beginning. The key point seems to be that predictability throughout the strategic planning process is more important than the internal politics of the organization.

Related to this point is the idea of placing value directly on ideas, rather than their sources.  Gagnon stresses that this is the most important principle to highlight at the outset of strategic planning session.  When working with planning groups, he asks executives to “leave titles at the door” so that the value of the idea can win over the status of the contributor.  In some cases, this may prove to be impossible, which is why he recommends sometimes bringing in impartial third party facilitators, and not allowing the CEO or someone with formal authority to run the planning sessions, so ideas may be freely contributed.

Gagnon’s final principle is “implementation is paramount”.  While strategic planning inherently is about ideas, often big abstract ideas, here he advises to keep practical concerns at the forefront of the strategic planning.  While strategic planning is difficult work, the implementation after the fact is when the “real work” begins, and obviously where success or failure takes hold.

The final point Gagnon makes is that strategic planning requires mental readiness.  If the team members, or the organization isn’t mentally prepared for the strategic planning process, or for a change in strategy, the process is hamstrung from the beginning.  This is something to keep in mind from an overall perspective.

Ultimately, Gagnon asks us to consider: “which mindset do you think is more conducive to developing the best blueprint for your company's future?”

I would pose the question: do you think the right mindset is as important as Gagnon makes it out to be?  Is there anything that he may have missed, or misstated?

Article: Strategic Planning: Establishing the Right Mindset

By: Ray Gagnon

Link: http://www.huffingtonpost.com/ray-gagnon/strategic-planning-right-mindset_b_2017833.html

The "Two-in-a-Box" model for strategic planning

This week's reading concentrates on the planning process for strategy. The article 'Real Value of Strategic Planning' [1] talks about preparing individuals to make strategic decisions rather than preparing a general strategy. One of my previous employers, Cognizant Technology Solutions, uses a unique "Two-in-a-Box" (TIB) [2] model for strategic planning that I felt was really effective. It uses both the concepts of preparing a stand alone strategy as well as relying on your gut feeling to take run time decisions.

The TIB model basically states that two people will be responsible for every client. In most companies, especially ones dealing with the offshore software development model, the delivery manager is responsible for keeping the client happy as well as making sure that the offshore product delivery is according to schedule (notice how these things are related to each other). In Cognizant, each client had two delivery managers. One was "onsite" and interacted with the client while the other one was "offshore" and handled the product delivery and schedule. The benefit of this methodology was that it used both aspects of strategic planning as discussed in the article [1]. The overall strategy was decided at the Business Unit level and all the delivery managers were involved in it. However, the client interaction and the offshore team management were different from each other and required a seperate strategy for day to day management which was decided by the individual delivery managers based on their experiences and gut feeling.

To generalize the strategy on a company level, the "onsite" person is the Client Partner (CP) [3] who is part of the relationship management team. He [4] generally has an MBA and is responsible for communicating the needs of the client to the offshore team. The Global Delivery Manager (GDM) is the other person in the TIB model who is technically inclined and has experience leading large technical teams. The GDM changes the strategy for delivery schedules, product features, etc. based on inputs from the CP and the offshore Project Managers. While he is involved in and keeps in mind the overall strategy for the Business Unit when taking these decisions, he is not binded by the strategic model for the smaller day to day decisions. For example, if the overall strategy of the BU is to increase revenue by $3 Million for 2012, then the decision to postpone internal product delivery by 1 week will not be affected. This lets each manager in the TIB model have the independence to make run time decisions without the need to consult additional people.One of the benefits of TIB is that each manager develops expertise in his own field and prepares himself to take strategic decisions based on past experiences rather than depending on the overall BU strategy as in most organizations. This prepares resources within the organization that are specialized in their fields and can be tapped for global projects in the future based on their expertise rather than local availability (The Cognizant 2.0 or C2 project).

From my experiences, I could see this is an effective model for a technology based firm with an offshore office. However, whether this will work for firms that are localized (have their clients in the same country) or are smaller in size (the cost associated with duplication of resources in the TIB model) is something that is open to discussion.



[1] The Real Value of Strategic Planning (Kaplan and Beinhocker, MIT Sloan Management Review, Winter 2003)
[2] http://hbr.org/product/cognizant-technology-solutions/an/408099-PDF-ENG
[3] http://www.cognizant.com/two-in-a-box
[4] 'He' used as a representative pronoun throughout the article

How “sustainable” should be the strategy of a startup or a small company?

Sustainability has been going around as a buzz word these days but what is the meaning of sustainability? Sustainability in a business context is the long term success of a company from more than just economic perspective. In old economy, companies were considered to sustain in long run if their financials were strong, while the modern market asks companies to be sustainable according to social, cultural and environmental measures as well. But is it beneficial for a start up or a small business to revisit their strategy thinking about these measures? The following article evaluates costs and benefits for a start up or small business to incorporate sustainability in their strategy from different perspectives.

Internal and External Business Processes

Today, large corporations are finding it difficult to make their internal operations more society and environment friendly. If small companies incorporate sustainability in their strategy at an early stage, then their operations would also inherit good practices earlier and at a lower cost. For example, having efficient buildings, optimally utilized facilities and machinery, use of recycled materials, sustainable supply chain will continue to save cost even when the company grows larger.

Consumers and Employees

Spreading consumer awareness about using sustainable products and services, providing clean and healthy environments for employees and similar sustainable initiatives does not cost a lot. But doing so by putting consumers and employees at the centre of strategy helps a small firm differentiate their products or services in the market, improving their work environment, creating a better brand value and in turn generating greater revenue.

Government and External Factors

Modern governments in developed as well as developing nations have started encouraging businesses to go sustainable by providing various monetary benefits. For example, cheap raw materials for producing renewable energy, lower taxes for “green” products or services. Governments are also increasing costs for the companies which are not sustainable, for example, carbon taxes. Having sustainability in strategy or core values helps developing environmental and social partnerships with NGOs and setting standards which can lead to early mover advantage in marketing. For example, a small firm can reduce waste production and set a standard for waste production in its market. In such a case, its competitors would have to comply with such standards to avoid customer dissatisfaction.

Innovation

The key advantage of involving sustainability goals and constraints in your strategy is that it brings out innovation. One of the examples of sustainability driven innovation is Zipcar car sharing. Making car rentals convenient for the community and reducing carbon emissions by optimal use of cars were the drivers behind the car sharing model of Zipcar. Today, Zipcar is a $200M company. Need to reduce water and energy usage has driven technology innovations and better quality of products.

After all, economics says that goal behind any business is to make profit. The article provides sufficient arguments to conclude that incorporating sustainability in a small company’s strategy will not just satisfy the desire of giving back to society or maintaining ethical integrity but can possibly reduce costs, increase revenues and bring innovation.